Energy’s Two Revolutions

This GreenBiz Q&A with Amory Lovins is part of the web site's 2012 State of Green Business report, available for download here.

GreenBiz: What does the near future hold for businesses looking to make progress on improving energy efficiency?

Amory Lovins: Many more business leaders will start to realize over the next year that the efficiency potential is much larger and more lucrative than had been thought and that the channels for delivering efficiency services and performance to them are maturing.

We’ve just surveyed the opportunities in depth in a new business book called Reinventing Fire: Bold Business Solutions for the New Energy Era and a supporting web site ReinventingFire.com. We had extensive participation by business in both content and peer-review. The findings were startling: The book details how the United States could run a 2.6-fold bigger economy in 2050 with no oil, no coal, no nuclear energy, one-third less natural gas, and at a $5 trillion lower net present value cost, assuming all externalities are worth zero—meaning we calculate savings only from market prices without counting any hidden environmental or social costs or benefits. All this requires no new inventions and no new acts of Congress: the transition is led by business for profit.

We integrated all four energy-using sectors—transport, buildings, industry, and electricity—and found, as you might expect, it’s a lot easier to solve the automotive and electricity problems together rather than separately. We also integrated four kinds of innovation—not just the usual two, technology and policy, but also design and strategy, which are even richer in potential. Together, these give you much more than the sum of the parts, especially in creating disruptive business opportunities.

We also detail the opportunities for businesses to get more work out of the energy they’re now using. We found that the 120 million buildings in the United States could triple or quadruple their energy productivity with an average internal rate of return of 33 percent. That is, by investing $0.5 trillion, you could return $1.9 trillion in present value. In industry, too, we found ample scope for doubling energy productivity with a 21 percent internal rate of return. These are among the highest and least risky returns in the whole economy.

GreenBiz: A lot has been achieved in terms of energy efficiency over the past few years, especially in commercial buildings. Are there specific technologies or systems that you think hold particular promise for expanding on these gains?

Lovins: I think the big story in buildings, industry, and vehicles efficiency is what we call integrative design. That’s not a technology; it’s way of combining technologies to get bigger savings at lower cost—that is, to achieve expanding returns, not diminishing returns, to investments in energy efficiency.

The Empire State Building, where we co-led the design [of a recent efficiency overhaul], is a good example. The key to the Empire State Building retrofit was an unprecedented onsite remanufacturing of all 6,514 windows so they’d pass light much better than heat. Those “superwindows,” combined with better lights and office equipment and other improve ments, cut the peak cooling load by a third. Then, instead of replacing and expanding the old chillers, we could renovate them in place and reduce them. That saved over $17 million of capital expenditures, which helped pay for everything else. The overall results have been stunning: payback of the investments in three years, enormously improved financial perfor mance, and higher occupancy with higher rent and higher-quality tenancies. And to [owner Tony Malkin’s] great credit, he’s rolling these projects out to his whole portfolio and freely sharing all of the analysis and findings with his competitors. That public-spirited generosity benefits the whole industry.

GreenBiz: How fast is all of this moving? Can we really get there quickly?

Lovins: There are two revolutions going on in electricity. One is saving most of it that’s now wasted, and the other is making it differ ently. Most people don’t realize that half of the world’s new generating capacity since 2008 has been renewable. If you exclude the big hydro dams that are still being built in some countries, the remaining, more distributed renewables in 2010 were more than a $151 billion business that added over 60 billion watts in that year alone, and thereby exceeded the installed global capacity of nuclear power.